EMBARGOED UNTIL 00.01 hours 20 June 2011: Business Sales were relatively flat in May, an encouraging sign following declines in recent months, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The BSI is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 30% – 40% of the Australian market. The BSI posted a gain of 0.02% in May.

According to Matt Comyn, Executive General Manager, Local Business Banking, Commonwealth Bank, the latest figures were a further testament to the stagnant nature of consumer spending but also revealed sectors that were actually benefiting from outside market forces.

“While the retail sector continues to post lacklustre results, Aussie consumers are in fact diverting what cash they are willing to spend towards experience-based activities,” said Mr Comyn.

“The Amusement & Entertainment category has continued to post positive gains, as especially cold weather in May looks to have driven consumers indoors to venues including cinemas and bowling alleys. Utilities is another sector that has seen similar gains, with the weather again being the likely cause as households consume greater levels of electricity to keep warm.”

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said that the latest results had also given more clarity on recent sales trends, following March and April which had been disrupted by events such as the extended Easter break.

“The trend results now show that February to April 2011 was a period of flat, to slightly firmer economy-wide spending,” said Mr James.

“That is important as it’s shown that sales have actually been a little better than initially thought. That having been said, the gains being witnessed are minor and it’s unlikely that the pattern will change anytime soon. Combined with the weaker economic data seen recently, we would therefore expect the Reserve Bank to remain on the interest rate sidelines.”

Industry analysis – majority of sectors continue to grow

The majority of industry sectors are still recording spending growth in trend terms. Only four of the 20 sectors reported weaker spending in trend terms in May, a similar result to both March and April. Retail stores continued to show weaker performance, down by 0.3 per cent, followed by Automobiles & Vehicles with sales down 1.0 per cent.

The strongest lift in spending in trend terms was by Amusement & Entertainment up 1.4 per cent, followed by both Contracted Services (includes building trades such as electricians as well as veterinary services) and Utilities (both up 0.9 per cent). Both Contracted Services and Amusement & Entertainment were also strongest in annual terms, up 14.1 per cent and 12.3 per cent respectively.

State / Territory analysis – NSW weakest

Six of the states and territories recorded weaker sales in trend terms in May, up from five in April. The weakest result was in NSW (down 1.9 per cent), followed by South Australia (down 1.2 per cent) and Northern Territory. Sales in South Australia have consistently softened over the period with the rate of decline accelerating over the past three months.

The ACT has shown consistent growth over the past eight months, up again in May with an increase of 0.8 per cent. This was followed by Tasmania, up 0.1 per cent.

“We are once again seeing patchy performance across the country, however the sector picture remains positive,” said Mr James. “June may also provide an uplift for retailers, with the traditional End of Financial Year sales likely to drive higher numbers of consumers into traditional bricks and mortar stores.”

The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 – 40 per cent of the market).

The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 20 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.

Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.

The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.

The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment. Refer to Table 1 for the MCC listing.